Monday, January 17, 2005

Film industry hits up government for your money

VICTORIA - Colin Hansen is following a safe rule in dealing with B.C.'s film industry, which once again has its hand out for tax dollars.
When someone wants something from you and demands an immediate answer, it's best to say no, one of my early bosses advised. It's proved to be good advice.
B.C. film companies want a tax break, and say that if they don't get it immediately they'll pull out of the province and head down the road to Ontario or Quebec. The companies already get hefty subsidies from both the provincial and federal governments, which have played a role in helping develop a $1-billion film and TV industry in the province.
But just before Christmas the Ontario government decided to offer incentives to get a bigger share of the business. The Ontario Liberals responded to an industry lobbying effort and increased the money it will pay to film companies working in the province. Quebec quickly followed suit.
And B.C. companies reacted. Give us the same deal within the next couple of weeks or we're gone, said a half-dozen of the larger companies in B.C.
Ultimately it's a business decision, for the companies and for the government. B.C., Ontario and Quebec had been offering similar subsidies. For foreign productions -- TV series and movies -- the governments had been offering a tax credit that effectively reimbursed the companies for 11 per cent of their wage costs. The film industry in Ontario, suffering from the fallout from the SARS panic and the rising Canadian dollar, persuaded the government to raise that credit to 18 per cent. A few days later Quebec upped the ante to 20 per cent.
Governments like to talk about the value of B.C.'s film infrastructure, and the skilled workforce and the great climate and scenic opportunities. We like to think those are the things that makes us Hollywood North.
But the industry has confirmed those aren't the critical factors. The movie industry is chasing subsidies these days. If one province, or Texas or Mexico or Romania, comes up with a better offer, the work can move.
The money is significant. A typical made-in-B.C. movie may have a budget of $20 million, with about $7 million of that local wage costs that are eligible for the subsidy. In B.C., under the current rules, the company would get a $770,000 tax break from the province. In Ontario, the same company would now get an extra $500,000 back from the provincial government. (In both cases, the companies would also get an additional $1.3 million from Ottawa in tax breaks. The B.C. government also provides lots of other help and subsidies to the industry.)
On one hand, the subsidies are obviously galling. A working single parent in Lillooet is being asked to pay higher taxes to subsidize a successful corporation -- and the high-paid workforce -- making movies in Vancouver.
Taxpayers have every right to wonder why the employees in the industry don't take a seven-per-cent pay cut instead of looking to government to come up with the cash to protect their jobs and the companies' profits.
Hansen will probably deliver the tax cuts, either in next month's budget or sooner.
The justification will be that it makes business sense. The film companies say they're willing to send the work to Ontario, claiming that up to half the $1-billion business could be lost.
The government's first task will be to try and judge if the industry is bluffing. Then it will have to calculate the cost of the subsidy, and balance that against the tax revenue that would be lost if the companies follow through on their threats and the spin-off benefits.
And at least for now, the balance will likely come down on the side of the subsidies. Until some other government decides to offer even bigger subsidies to try and attract film companies.
Footnote: Premier Gordon Campbell has oddly decided to thrust himself into the middle of the issue, asking Hansen to set up a meeting with the film industry honchos. It reinforces the impression that he wants to control all the issues, and reduces the province's bargaining ability. Hansen could have said he wants to help, but the boss would only go so far. Campbell can't use that tactic.